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A Project of The Annenberg Public Policy Center

Democrats Exaggerate Shutdown Costs

Some Democrats have taken to exaggerating the cost of the federal government shutdown, suggesting that it cost the economy nearly 1 million jobs, and claiming that it cost taxpayers $30 billion. Neither statement is accurate.

Sen. Heidi Heitkamp of North Dakota stated in an Oct. 18 TV interview with a local station, while discussing the impact of the just-concluded shutdown:

Heitkamp: [S]ome people are saying that the job implications may go as high as almost 1 million jobs. That is just not a path forward.

Heitkamp’s 1 million figure is four times larger than the highest estimate we’ve seen so far from any economist for job losses due to the shutdown.

She didn’t specify the source of her figure. However, the source is probably a study released only four days earlier by the Peter G. Peterson Foundation under the headline, “Fiscal Policy Uncertainty has Resulted in 900,000 American Jobs Lost.” That study, however, was not an estimate of the job cost of the 16-day shutdown alone. It attempted to estimate “the cost of crisis-driven fiscal policy over the past few years.

That report was prepared for the foundation by Macroeconomic Advisers LLC, and it estimated the effect of “fiscal policy uncertainty” including Standard & Poor’s first-ever downgrading of U.S. federal debt in August 2011 (after the last debt-ceiling showdown), and the “fiscal cliff” showdown in December 2012, as well as the recent shutdown.

Update, Oct. 22: After we posted this item, the White House released a report by its own Council of Economic Advisers citing economic indicators that it said are “consistent with” a conclusion that the shutdown slowed job growth by “about 120,000 private-sector jobs in the first two weeks of October.” The CEA said that figure “could understate the full economic effects of the episode to the degree it continues to have an effect past October 12th.” Still, that’s a fraction of the 1 million figure Heitkamp cited.

As for the cost to taxpayers, Sen. Dick Durbin of Illinois said on “Fox News Sunday” Oct. 20:

Durbin: We just went through a government shutdown of your creation. It’s cost $30 billion for taxpayers, hundreds of thousands of jobs, and the Republican Party brand is at the lowest level in the last 30 years.

We’ve been unable to find any estimate of a $30 billion cost to “taxpayers,” and that figure is 20 times higher than the $1.5 billion estimate President Bill Clinton gave in 1996 for the combined cost of the two government shutdowns, totaling 26 days, that took place in fiscal 1996. Even accounting for inflation, that estimate for the cost of the 1996 shutdowns would be only about $2.2 billion in today’s dollars.

Durbin may have meant to refer to the cost to the U.S. economy as a whole. But estimates for total economic cost only range from $12 billion to $24 billion. The $12 billion estimate comes from Macroeconomic Advisers, but Democrats are fond of quoting the higher of those figures, issued by Standard & Poor’s on Oct. 16, only hours before the shutdown ended. But so far we haven’t seen an estimate as high as $30 billion from any economist.

There’s little question that the shutdown cost taxpayers something. National Parks lost out on user fees during the shutdown, for example. And agencies may end up working overtime to catch up with work that wasn’t done during the closure. There’s also wide agreement that the overall economy will suffer, and job growth will slow, because of the disruption. Government contractors laid off thousands of workers during the closure, for example. And unlike federal workers, those private-sector job holders aren’t likely to get back pay for the time they were idle.

Recent polling shows Republicans are taking most of the blame for the damage. But that’s no excuse for Democrats to exaggerate it.

We sought comment from representatives for Heitkamp and Durbin. We’ve received nothing from Durbin, but a Heitkamp spokesperson said we are misinterpreting the senator’s words: “The Senator referred to job implications, meaning jobs impacted. During parts of the government shutdown, 800,000 federal workers were furloughed, and more than 250,000 contractors’ jobs were also affected.”

We don’t think so. Heitkamp was discussing the cost of the shutdown to the U.S. economy, not the temporary impact on federal workers. Here’s the full context:

Heitkamp: The shutdown was like this incredible event because it was over debt and deficit issues. But yet every day we were out of work, when we wouldn’t let workers work, cost the American public $160 million a day. And now Standard & Poor’s is saying the shutdown cost the American economy $24 billion. And some people are saying that the job implications may go as high as almost 1 million jobs. That is just not a path forward.

— Brooks Jackson

Corrected, Oct. 22: We initially misidentified Sen. Dick Durbin’s home state. He represents Illinois.